Contents Corporate Governance Report Foreword by the Chairman of the Board

CORPORATE GOVERNANCE REPORT Contents Corporate governance report Foreword by the Chairman of the Board ...... 42 Focus on strategy issues and risk management Corporate Governance 2008 ...... 43 Shareholders ...... 43 Annual General Meeting ...... 43 Nominations Committee ...... 44 Board of Directors ...... 44 Auditor ...... 45 Board of Directors ...... 46 Composition of the Board 2008/2009 ...... 46 Board members’ attendance 2008/2009 ...... 47 Overview of the governance in the Trelleborg Group . . . . . 48 Group Management ...... 50 Remuneration to the Board and senior executives . . . . . 52 Principles ...... 52 Remuneration to management 2008 ...... 52 Long-term incentive program ...... 53 Remuneration to the Board 2008 ...... 53 Remuneration to the auditor 2008 ...... 53 Report by the Board of Directors’ on Internal Control . . . 54

Underwater buoyancy Hundreds of kilometers out to sea, gigantic drills are being used to locate oil. In this extremely harsh environment, the oil rig is protected by Trelleborg’s specially- designed buoyancy modules, which reduce the weight of long, heavy oil pipelines made of steel - a different solution.

ANNUAL REPORT 2008 TRELLEBORG AB 41 CORPORATE GOVERNANCE REPORT Focus on strategy issues and risk management

Sound governance and control supports good business. This was the heading for my introduction to this section of Trelleborg’s 2007 Annual Report. I believe that this is even more important in the turbulent business environment that has particularly characterized the latter part of 2008. Sound corporate governance is not only about structure and clarity in management and areas of responsibility, but it also relates to good transparency so that shareholders can understand and monitor the development of the company – which is also increasingly important in times marked by harsh market conditions and major challenges. Trelleborg, as with any other company, must earn the trust of its stakeholders on a daily basis. During the year, the work of the Board of Directors focused largely on strategy issues – the best way to develop our operations for the future. We compete in a demanding market in which our strategies provide stability and long-term focus. At the same time, our strategies provide support on a daily basis when we must rapidly adapt and act to cope with the prevailing situation, which involved radical changes to market conditions at the end of 2008. Another key issue in a volatile environment is risk management. For the past two years, we have taken a more systematic approach to how we develop and work on an integrated approach to risk in the Group. During 2008, we placed particular emphasis on further strengthening what we call Enterprise Risk Management, and continued work to identify and evaluate the Group’s risks and risk management. We now have a framework and a structure in place. Governance and control, strategies, risk management and corporate responsibility are closely related issues. In this year’s Annual Report, this is highlighted by placing the sections on Risk Management, Corporate Governance and Corporate Responsibility close together. We are endeavoring to further develop our work within these areas into an integrated part of daily operations. We have made some progress, but much work remains – which is the way it should be. These are not processes with xed completion dates; they must be developed and improved continuously.

Anders Narvinger Chairman of the Board

42 ANNUAL REPORT 2008 TRELLEBORG AB CORPORATE GOVERNANCE REPORT Corporate Governance 2008

Trelleborg is a publicly traded Swedish limited company that is listed on the NASDAQ OMX Nordic Exchange Stockholm. Trelleborg applies the Swedish Code of Corporate Governance and presents its 2008 Corporate Governance Report in this section. Follow-up during 2008 has resulted in Trelleborg not having any deviations to report. This report has not been examined by the Company’s auditor.

Shareholders Trelleborg’s Series B shares have been traded on the NASDAQ OMX Further information on corporate governance Nordic Exchange in Stockholm since 1964. Share capital in Trelleborg The following information is available at www.trelleborg.com: amounted to sek 2,259 m, represented by 90,357,261 shares, each with • The document “Overview of Trelleborg AB’s application of the Swedish a par value of sek 25.00. Code of Corporate Governance” Trelleborg has two classes of shares: 9,500,000 Series A shares and • In-depth information on internal steering documents, such as the 80,857,261 Series B shares. Series A shares each carry ten votes and Series Articles of Association and the Code of Conduct B shares each carry one vote. All of the Series A shares are owned by the • Information from Trelleborg’s Annual General Meetings since 2004: Dunker Funds and Foundations, which were created through testamentary • Notification of AGM disposition by former owner and founder of the Helsingborg and • Minutes of AGM Trelleborg rubber-production plants, Henry Dunker, who died in 1962. • President’s presentations At the end of the year, the number of shareholders was 42,600 • Press releases (41,631). • Corporate Governance Reports of earlier years, since 2004. Of the total number of shares, foreign shareholders accounted for The Swedish Code of Corporate Governance is available at: approximately 18 percent (26). Institutions accounted for the majority www.kodkollegiet.se. of ownership. Of the total shares at year-end, 83 percent (85) were owned by legal entities, 17 percent (15) by private individuals, repre- • Re-election of the Board members Heléne Bergquist, Staffan Bohman, senting 91 percent (92) and 9 percent (8), respectively, of the total Rolf Kjellman, Claes Lindqvist, Anders Narvinger and Peter Nilsson. number of votes. The election of new Board member Sören Mellstig to replace For further information on the share and shareholders, refer to Berthold Lindqvist, who declined re-election. pages 108 – 109 and Trelleborg’s website. • Re-election of Anders Narvinger as Chairman of the Board. Annual General Meeting • Re-election of PricewaterhouseCoopers as the Company’s auditor The 2008 Annual General Meeting took place on Monday, April 28, for an additional four-year period. 2008 in Trelleborg. At the meeting, 649 shareholders were in atten- • That fees to Board members, excluding travel expenses, should be dance, personally or by proxy, representing about 70 percent of the paid in the total amount of sek 2,750,000, to be distributed as fol- votes. One shareholder, Dunker Funds and Foundations, represented lows: sek 950,000 to be paid to the Chairman and sek 360,000 to approximately 79 percent of the votes at the meeting on its own. be paid to each member of the Board who is not an employee of the Anders Narvinger was elected Chairman of the meeting. Group, that remuneration should be paid to the Audit Committee in All Board members elected by the Annual General Meeting were the amount of sek 150,000 to the Chairman of the Committee and present, with the exception of Berthold Lindqvist. sek 100,000 to the other Audit Committee members, that remunera- Resolutions tion should be paid for assignments in the Nominations Committee The minutes from the Annual General Meeting have been made avail- in the amount of sek 50,000, and that the auditor’s fees shall be based able on Trelleborg’s website. The resolutions passed by the Meeting on a cost-level agreement for the four-year mandate period. included the following: • The principles for remuneration and other conditions of employment • To pay a dividend of sek 6.50 per share for 2007 as per the Board’s for the President and other senior executives. and President’s proposal. • Procedures for the Nominations Committee’s appointment and work.

Annual General Meeting attendance Number of shareholders Ownership structure % Number Number % 100 1,000 60,000 100

80 800 50,000 80 40,000 60 600 60 30,000 40 400 40 20,000

20 200 10,000 20

0 0 0 0 2006 2007 2008 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Votes, % Persons, number Number of shareholders Foreign shareholders, % Swedish shareholders, %

ANNUAL REPORT 2008 TRELLEBORG AB 43 CORPORATE GOVERNANCE REPORT

Nominations Committee Inc and CFO of Esselte AB, where he also held other positions. Hans In accordance with a resolution by the 2008 Annual General Meeting, Biörck has been a member of the Henry and Gerda Dunker Founda- the Chairman of the Board was assigned the task of asking five repre- tion and Donation Fund No. 2 since 2003. He is also a member of the sentatives of the company’s major shareholders at the close of the third Swedish Financial Reporting Board. quarter to become members of the Nominations Committee in order Moreover, the Committee proposes the re-election of all other to formulate proposals on Board members, the Chairman of the Board, Board members, with Anders Narvinger as Chairman. and remuneration to Board members and Board committees to be presented for approval at the 2009 Annual General Meeting. The compo- Board of Directors sition of the Nominations Committee was published on Trelleborg’s Trelleborg’s Board of Directors comprises seven members elected by the website and through a press release on October 23, 2008. Annual General Meeting, which includes the President and CEO. The selection aim of the principal owners is that elected Board Sören Mellstig was elected as a new Board member to the 2008 members shall possess knowledge and experience relevant to Trelleborg. Board of Directors. Berthold Lindqvist declined re-election. Other The rules regarding independent Board members, as stated in the members were re-elected. All personnel representatives were re-elected: Swedish Code of Corporate Governance, are observed. Kim Davidsson and Karin Linsjö representing LO (The Swedish Trade The Nomination Committee for 2009 held two meetings and a Union Confederation), and Alf Fredlund and Rolf Larsson (deputy) number of telephone conferences. The Nominations Committee representing PTK (The Council for Negotiation and Cooperation). comprised Didrik Normark, Henry and Gerda Dunker Foundation During the year, Rolf Larsson, who retired, was replaced by Birgitta (Chairman), Ramsay Brufer, Alecta (Secretary) and the members Lars Håkansson as deputy. The Group’s CFO, Bo Jacobsson, attends the Öhrstedt, AFA Insurance Companies, Henrik Didner, Didner & Gerge Board meetings as does the General Counsel, Ulf Gradén, who is the Funds and KG Lindvall, Swedbank Robur Funds. In addition, the Board’s secretary. Other salaried employees participate in the Board Chairman of the Board, Anders Narvinger, was a member of the Nom- meetings to make presentations on particular matters. inations Committee for 2009. The Committee represented approximately Independence of the Board 69 percent of the shareholders’ votes. The Board’s assessment, which is shared by the Nominations Commit- As a basis for the Committee’s work, information on the company’s tee, regarding the members’ position of dependence in relation to the operations and strategic focus was presented by the President. In addi- company and the shareholders is presented in the table “Composition tion, the Chairman of the Board presented annual evaluations of the of the Board 2008/2009.” As evident from the table, Trelleborg complies Board members’ efforts. The Chairman of the Board also presented with NASDAQ OMX Stockholm’s rules and regulations and the Swedish information on the Board’s work during the year and the work of the Code of Corporate Governance’s requirements that the majority of the Audit, Finance, and Remunerations Committees. Board members elected by the General Meeting must be independent in Rolf Kjellman, elected to Trelleborg’s Board in 1997 representing relation to the company and the company management, and that at least Trelleborg’s principal shareholder the Dunker Funds and Foundations, two of these shall also be independent in relation to the company’s major has declined re-election at the 2009 Annual General Meeting. Rolf shareholders. Kjellman, born in 1939, has retired from his position as Executive Member of the Henry and Gerda Dunker Foundation and Donation Work of the Board of Directors Fund No. 2., but remains a member of the Board. Claes Lindqvist, also During 2008, 12 Board meetings were held, of which three were a member of the Board of Trelleborg, will replace Rolf Kjellman as the extraordinary meetings. The main issues were: Executive Member of the Henry and Gerda Dunker Foundation and • No. 1, February: Year-end report 2007, forecast 1 2008, report Donation Fund No. 2. from auditor, Enterprise Risk Management, structural and acquisi- The Nominations Committee proposes that the 2009 Annual tion issues. Auditor present. General Meeting elect Hans Biörck as the new member of the Board. Hans Biörck, born in 1951, holds a degree in business administra- • No. 2, February: 2007 Annual Report. tion and is Executive Vice President and Chief Financial Officer at Skanska AB. Among other positions, he was formerly CFO of Autoliv • No. 3, April: Interim report for first quarter, review of ongoing activities within Trelleborg Automotive, investments, structural Nominations Committee for the 2009 Annual General and acquisition issues. Meeting • No. 4, Name Representing Share of votes April: Statutory meeting following the Annual General December 31, 2008 Meeting. Authority to sign for the company, internal steering instruments, Board committes. Didrik Normark Dunker Funds and Foundations 55.6% Ramsay Brufer Alecta 4.8% • No. 5, June: Forecast 2 2008, cash-flow and financing issues, Lars Öhrstedt AFA Insurance Companies 4.5% investments, structural and acquisition issues. Henrik Didner Didner & Gerge Funds 3.6% • No. 6, KG Lindvall Swedbank Robur Funds 0.9% July: Six-month report, investments, structural and acquisition issues Total 69.4%

44 ANNUAL REPORT 2008 TRELLEBORG AB CORPORATE GOVERNANCE REPORT

• No. 7, September: Strategy plan, investments, structural and acquisi- Counsel and Secretary of the Finance Committee, Ulf Gradén, participate tion issues, internal steering instruments, Enterprise Risk Manage- in the meetings of the Finance Committee. Head of Group Finance ment. Visit to Trelleborg Engineered Systems in Mjöndalen, Norway. participated when necessary. The Finance Committee held six meetings during 2008. The • No. 8, September: Economic trend, earnings issues, structural issues work primarily focused on internal steering instruments, financial pertaining to Trelleborg Automotive in France. risk management and financing matters.

• No. 9, October: Economic trend, earnings issues. Remunerations Committee In 2008, the Remunerations Committee comprised the Board members • No. 10, October: Interim report for the third quarter, economic Anders Narvinger, who also chairs the Committee, Staffan Bohman trend, earnings issues, raw-material prices, structural issues connect- and Claes Lindqvist. ed to Trelleborg Automotive, structural projects, forecast 2009, The Remunerations Committee held three meetings in 2008 and cash-flow and financing issues. also maintained ongoing communications in conjunction with appointments and other payroll issues. Work during 2008 focused • No. 11, November: Report from auditor, forecast 1 2009, structural primarily on the Groups’ leadership development and terms of issues connected to Trelleborg Automotive. Auditor present. employment and incentives for senior executives. • No 12, December: Economic trend, issues related to earnings. Auditor The responsibilities of the Nominations Committee included preparing a The Board conducts reviews with the auditor when plans for the audit proposal for the Annual General Meeting concerning the auditor to be procedure are presented and when audit reports are to be considered. elected at the meeting for a period of four years. The 2008 Annual All business areas are usually given the opportunity to give an in-depth General Meeting re-elected the PricewaterhouseCoopers AB firm of presentation of their operations at a Board meeting at least once a year. authorized public auditors, including authorized public accountants Göran Tidström and Olov Karlsson. Göran Tidström was appointed as Evaluation of Board members 2008 Auditor in Charge. The Chairman of the Board is responsible for evaluating the Board’s work including the efforts of individual members. This occurs annually GÖRAN TIDSTRÖM GÖRAN TIDSTRÖM in accordance with an established process. Periodically, evaluation is Authorized Public Accountant, Auditor in also conducted with the assistance of external consultants. During Charge 2008, evaluations were conducted through interviews and discussions Auditor in the Trelleborg Group since 2004. between the Chairman of the Board and individual Board members, as Partner of PricewaterhouseCoopers since 1976. Quali cations: Graduate in business administration, well as feedback and discussions with the entire Board of Directors. Authorized public accountant since 1973. The evaluation focuses on such aspects as supply and demand for spe- Assignments: Auditor of Telia Sonera, AB Volvo, Meda, cific expertise and work methods. The evaluation is also used by the the Royal Opera. Chairman of the Board of EFRAG (Eu- ropean Financial Reporting Group) and Deputy Presi- Nominations Committee as the basis for proposals for Board members dent of IFAC (International Federation of Accountants). and remuneration levels. Born: 1946. Audit Committee In 2008, the Audit Committee comprised the Board members Rolf OLOV KARLSSON Kjellman, who is also the Committee Chairman, Heléne Bergquist and Authorized Public Accountant OLOV KARLSSON Anders Narvinger. The Group’s CFO, Bo Jacobsson, the Group’s General Auditor since 2004. Counsel and Secretary of the Audit Committee, Ulf Gradén, and the Partner of PricewaterhouseCoopers since 1987. Quali cations: Economist program Umeå University, Head of the Internal Control staff function participate in the Audit Authorized public accountant since 1980. Committee meetings, as does the company’s auditor. Assignments: Auditor of AB Volvo. In 2008, the Audit Committee held five meetings at which the Born: 1949. primary issues were risk analysis, the establishment and follow-up of the plan for the Internal Control staff function, a review of the elected auditor’s audit plan and the results of the audit, a review of interim reports, the annual report and the year-end report and policies applied in the financial reporting. The Audit Committee also considered reporting within the framework of Corporate Responsibility and commenced work on the drafting of matters concerning Enterprise Risk Management. Finance Committee In 2008, the Finance Committee consisted of Board members Rolf Kjell- man, who is also Chairman of the Finance Committee, Heléne Bergquist and Anders Narvinger. The Group’s CFO, Bo Jacobsson, and General

ANNUAL REPORT 2008 TRELLEBORG AB 45 CORPORATE GOVERNANCE REPORT Board of Directors

ANDERS NARVINGER ROLF KJELLMAN PETER NILSSON ALF FREDLUND

HELÉNE BERGQUIST CLAES LINDQVIST

STAFFAN BOHMAN KIM DAVIDSSON

KARIN LINSJÖ SÖREN MELLSTIG

BIRGITTA HÅKANSSON

Rolf Kjellman has declined re-election at the 2009 Annual General Meeting. The Nominations Committee, comprising the Chairman of the Board and representatives of the major shareholders corresponding to approximately 69 percent of the shareholders’ votes in Trelleborg, has decided to propose that the Annual General Meeting elect Hans Biörck as new Board member. See page 44 for further details.

Composition of the Board 2008/2009 Name Born Position Elected Dependence Audit Finance Remunerations Committee Committee Committee Anders Narvinger 1948 Chairman 1999 No Member Member Chairman Heléne Bergquist 1958 Member 2004 No Member Member – Staffan Bohman 1949 Member 2000 No – – Member Rolf Kjellman 1939 Member 1997 Yes* Chairman Chairman – Claes Lindqvist 1950 Member 2004 Yes* – – Member Sören Mellstig 1951 Member 2008 No – – – Peter Nilsson 1966 Member 2006 Yes* – – – Kim Davidsson** 1947 Member 1994 Alf Fredlund** 1946 Member 2001 Karin Linsjö** 1954 Member 2000 Birgitta Håkansson** 1950 Deputy*** 2008 * Rolf Kjellman and Claes Lindqvist are dependent in relation to the company’s major shareholders since they both have assignments for Trelleborg’s main owner, Dunker Funds and Foundations. Peter Nilsson is dependent in relation to the company as a result of his position as Trelleborg’s President. ** Member/deputy appointed by the employees. *** Replaced Rolf Larsson, who retired in October 2008.

46 ANNUAL REPORT 2008 TRELLEBORG AB CORPORATE GOVERNANCE REPORT

ANDERS NARVINGER ROLF KJELLMAN Members appointed by employees Chairman of the Board Board member Director-General of the Association of Swedish Engineering President of Henry Dunkers Förvaltnings AB. KIM DAVIDSSON Industries. Executive Member of Henry and Gerda Dunker Foundation and Employee representative Chairman of Alfa Laval AB (publ), V&S AB (Vin & Sprit), Coor Ser- Donation Fund No. 2. Engineering employee, appointed by the Unions of the Trelleborg vice Management AB and Lund University Development AB. Quali cations: Commercial Secondary School and Advanced Group (LO). Board member of Volvo Car Corporation. Banking Training. Chairman of the Industrial Labor Union (LO) and Chairman of the Quali cations: M.Sc. Eng. and Graduate in business adminis- Previously Regional General Manager, SEB in Malmö and the Trelleborg European Work Council. tration. province of Skåne. Quali cations: Tool maker, training in labor law, personnel policy Has previously held a number of positions in the ABB Group, in- Holdings 2008: 8,000 shares. and economics. cluding President and Chief Executive Of cer of ABB Sweden. Holdings 2007: 2,000 shares. Holdings 2008: – Holdings 2008: 10,000 shares. Holdings 2007: – Holdings 2007: 10,000 shares. CLAES LINDQVIST Board member PETER NILSSON ALF FREDLUND President and CEO Board member of the Dunker Funds, Southern Swedish Chamber Employee representative of Commerce and Industry, Novotek AB (publ), Connect Skåne, Engineer, appointed by the Unions of the Trelleborg Group (PTK). Board member of Beijer Alma AB (publ), Trioplast Industrier among others. Chairman of Unionen Trelleborg AB. AB and The Chamber of Commerce and Industry of Southern Quali cations: Graduate in business administration and M.Sc. Eng. Sweden. Quali cations: Engineer. Previous positions include a variety of senior positions at ASEA Quali cations: M.Sc. Eng. and Åkerlund & Rausing, and President and Chief Executive Of- Holdings 2008: 7,600 shares (own and family members). Previous positions include Business Area President, Trelleborg cer of Höganäs AB and Öresundskraft AB. Holdings 2007: 2,710 shares (own and family members). Engineered Systems and other posts within the Trelleborg Group, Holdings 2008: 10,000 shares. as well as management consultant at BSI. Holdings 2007: 10,000 shares. Holdings 2008: 26,500 shares and 100,000 call options (refer KARIN LINSJÖ to page 51). Employee representative Holdings 2007: 26,500 shares. SÖREN MELLSTIG Appointed by the Unions of the Trelleborg Group (LO). Board member Board member of the Social Services Board, Municipality of HELÉNE BERGQUIST Chairman of the Board of Aleris AB, Vatus Medical AB and Textilia AB. Trelleborg. Board member Board member of Munters AB (publ), Ferrosan A/S, PaloDex Oy, Quali cations: Elementary school and plant training. Dako A/S and Rindi Energi AB. Management Consultant. Holdings 2008: 167 shares. Quali cations: Graduate in business administration. Chairman of the Board of INVISIO Headsets AB (publ). Holdings 2007: 167 shares. Previous positions include President and Chief Executive Of cer Board member of Nordic Growth Market NGM AB. of Gambro and CFO and Vice President of Incentive. Quali cations: Graduate in business administration. Holdings 2008: 20,000 shares. BIRGITTA HÅKANSSON Previously Senior Vice President, Group Controller, AB Electrolux, Holdings 2007: 10,000 shares. Deputy employee representative Authorized Public Accountant, partner and member of the Board of PricewaterhouseCoopers in Sweden. Salaried employee, appointed by the Unions of the Trelleborg Group (PTK). Holdings 2008: 1,500 shares. Vice Chairman of Unionen Trelleborg AB. Holdings 2007: 1,500 shares. Quali cations: Secretarial studies, training in IT and accounting. Holdings 2008: 527 shares. STAFFAN BOHMAN Holdings 2007: 527 shares Board member Vice Chairman of Scania AB (publ) and EDB Business Partner ASA, Oslo (publ). Board member of Atlas Copco AB (publ), Boliden AB (publ), Inter IKEA Holding SA, Ratos AB (publ) and OSM AB. Quali cations: Stockholm School of Economics and Stanford Business School, US. Previously Chief Executive Of cer of DeLaval, Gränges and SAPA. Holdings 2008: 25,000 shares. Holdings 2007: 20,000 shares.

Board members’ attendance in 2008/2009 Name Position Board meeting Finance Committee Audit Committee Remunerations Committee Anders Narvinger Chairman 12 of 12 6 of 6 5 of 5 3 of 3 Heléne Bergquist Member 12 of 12 6 of 6 5 of 5 – Staffan Bohman Member 12 of 12 – – 3 of 3 Rolf Kjellman Member 11 of 12 6 of 6 5 of 5 – Claes Lindqvist Member 12 of 12 – – 3 of 3 Sören Mellstig Member 10 of 10* – – – Peter Nilsson Member 12 of 12 – – – Kim Davidsson Member 12 of 12 – – – Alf Fredlund Member 12 of 12 – – – Karin Linsjö Member 11 of 12 – – – Birgitta Håkansson Deputy 4 of 4** – – – Karin Linsjö was absent from Board meeting No. 5 in June. Rolf Kjellman was absent from Board meeting No. 9 in October. – Member not included in the committee in question. * Elected at the 2008 Annual General Meeting. ** Appointed during the year.

ANNUAL REPORT 2008 TRELLEBORG AB 47 CORPORATE GOVERNANCE REPORT Overview of governance in the Trelleborg Group

Shareholders The right of shareholders to make decisions on the affairs of Trelleborg is exercised by the Annual General Meeting or, where appropriate, an Extraordinary General Meeting, which is Trelle- borg’s highest decision-making body. The Annual General Meet- Nominations Committee ing is usually held in Trelleborg, Sweden, in the month of April. Trelleborg’s Annual General Meeting makes resolutions regarding procedures The Meeting adopts the Articles of Association, appoints the for the appointment and work of the Nominations Committee. The 2008 An- members and Chairman of the Board, elects the auditor, nual General Meeting decided that a Nominations Committee shall operate resolves on the adoption of the income statement and balance in order to prepare and present proposals to the shareholders at the Annual sheet, resolves on the allocation of the company’s profit and General Meeting regarding the election of Board members, the Chairman the discharge from liability to the company for the Board mem- and, where applicable, present proposals regarding auditors and remunera- bers and the President, makes resolutions regarding the ap- tion to the Board, Board committees and the auditors. The Nominations pointment of the Nominations Committee and its work, and the Committee shall consist of five members, who are to be representatives of principles for the remuneration and employment terms for the the five largest shareholders at the close of the third quarter. Accordingly, the President and other senior executives. Chairman of the Board shall, at the close of the third quarter, contact the five largest shareholders in the company, who shall each be given the opportunity to appoint one member of the Nominations Committee. In addition, the Nom- Auditor inations Committee may decide that the Chairman of the Board be a part of the Committee, but not be appointed its chairman. For a complete account Trelleborg’s auditor, elected by the Annual of the resolutions of the Annual General Meeting, see the minutes from the General Meeting, audits the company’s Annual General Meeting available at: www.trelleborg.com. Annual Report and accounts as well as the Board’s and the President’s management. The auditor’s work is based on an audit plan and he continuously reports observations to the Audit Committee throughout the year and to the Board, Elections both after the hard-close audit during Shareholders Nominations the autumn and in connection with the form the Annual General Meeting Proposals Committee approval of the six-month interim report and the Annual Report by the Board. The auditor collects opinions from the Audit Elections Elections Committee with regard to Trelleborg’s Information risks, which are taken into account in the audit plan. The auditor also participates Board of Audit Committee, Finance Committee, in the Annual General Meeting to present Information the audit report, which describes the Auditors Directors Remunerations Committee audit work and observations made. Objectives, Strategies, Reports, Steering Control instruments Internal ControlControl President and CEO Staff Objectives, functions Reports, activities, forecasts, values, Trelleborg Trelleborg Trelleborg Trelleborg Engineered Sealing Wheel business remuneration Automotive Systems Solutions Systems overview structures External steering instruments Internal steering instruments

External steering instruments Remuneration Policy and a definition of processes and the minimum require- The external steering instruments that constitute the framework of corpo- ments for effective internal control, including internal control regarding financial rate governance within Trelleborg include the Swedish Companies Act, reporting. Complete versions of many of the Group’s steering instruments are the Annual Accounts Act, the listing agreement with the NASDAQ OMX available on Trelleborg’s website. Stockholm, the Swedish Code of Corporate Governance and other relevant legislation. Rules of procedure of the Board of Directors Each year, the Board of Directors establishes a formal work plan clarifying the Board’s responsibilities and regulating the internal division of duties between Internal steering instruments the Board and its committees, including the role of the Chairman, the Board’s The internally binding steering instruments include the Articles of Association decision-making procedures, its meeting schedule, procedures governing the adopted by the Annual General Meeting and the Rules of procedure for the convening, agenda and minutes of meetings, as well as the Board’s work on Board of Directors of Trelleborg approved by the Board, Instructions for the accounting, auditing matters and financial reporting. The work plan also governs President of Trelleborg, Instructions for financial reporting to the Board of how the Board shall receive information and documentation as the basis for Trelleborg, Instructions for the Audit Committee established by the Board of its work and to be able to make well-founded decisions. Trelleborg, the Code of Conduct, the Communication Policy and the Treasury Policy. In addition to these steering instruments, there are a number of policies Instructions for the President and manuals that contain binding rules, as well as recommendations that Each year, the Board of Directors also establishes written instructions for the provide guidelines and guidance for the Group’s operations and employees. President that clarify the President’s responsibility for operational management, These include Values, Financial Manual (accounting and reporting rules), the form and content of reporting to the Board, requirements of internal steering

48 ANNUAL REPORT 2008 TRELLEBORG AB CORPORATE GOVERNANCE REPORT

The Board of Directors Composition of the Board In accordance with the Articles of Association, the Board of Directors of Trelleborg AB shall consist of three to ten members, elected annually by the Annual General Meeting for the period until the end of the next Annual General Meeting. Although the Articles of Association allow for the election of President and Group Management deputies, there are currently no deputies elected by the Annual General Meeting. In recent years, The President and CEO manages operations in the Annual General Meeting has elected seven members, including the President, who is also the accordance with the Swedish Companies Act, other Chief Executive Officer. In accordance with legislation, employees elect three Board members and a legislation and regulations, applicable rules for deputy. Trelleborg’s CFO participates in the Board meetings as does the General Counsel, who also listed companies, including the SwedishCode of serves as the Board’s Secretary. The Board has established three committees, the Audit Committee, Corporate Governance, the Articles of Association the Remunerations Committee and the Finance Committee. and the parameters set by the Board, including its instructions to the President. In consultation Responsibilities of the Chairman with the Chairman of the Board, the President The Chairman heads the work of the Board and is responsible for ensuring its compliance with the prepares necessary information and documentation Swedish Companies Act, other relevant legislation and regulations, the applicable rules governing on the basis of which the Board can make well- listed companies, including the Swedish Code of Corporate Governance, the Articles of Association, founded decisions, presents matters and motivates and the internal steering documents of the Board and its Committees. proposed decisions, while reporting to the Board It is the responsibility of the Chairman to monitor operations, in consultation with the President, on the development of the company. The President and to ensure that other Board members receive the information and documentation necessary to is responsible for leading the work conducted by maintain a high level of quality in discussions and decisions. The Chairman is responsible for evalu- Group Management and makes decisions in con- ating the Board’s activities, and this evaluation is then shared with the Nominations Committee. The sultation with other members of the management Chairman also participates in the deliberation of evaluation and development matters regarding the team, which consists of the heads of the business Group’s senior executives. The Chairman represents the company in all ownership issues. areas and Group staff functions. Responsibilities and work of the Board The responsibilities of the Board include monitoring the work of the President through ongoing reviews of the operation over the year, ensuring that Trelleborg’s organization, management and guidelines for the administration of the company’s interests are structured appropriately and that there is satis- factory internal control. In addition, the responsibilities of the Board include setting strategies and targets, establishing internal control instruments, deciding on major acquisitions and divestments Internal Control of operations, deciding on other major investments, deciding on financial investments and loans in The Internal Control staff function operates as accordance with the Treasury Policy and issuing financial reports, as well as evaluating the management the Group’s internal audit function and reports to of operations and planning managerial succession. The Board must convene at least seven times a the Audit Committee and the Group’s CFO. The year and otherwise as necessary. function works on developing and improving internal control regarding financial reporting in the Group, The Board’s responsibility for financial reporting in part by proactively focusing on the internal control The Board oversees the quality of financial reporting in part through instructions to the President, environment and in part by examining how internal instructions regarding financial reporting to the Board and through the Communications Policy, in control works. The proactive work on the internal part by considering reports from the Audit Committee in the form of written minutes, and through control environment focused particularly on devel- observations, recommendations and proposals for decisions and measures. The Board also assures oping and improving processes and establishing the quality of financial reporting by considering interim reports, annual reports and year-end reports minimum requirements for effective internal control in detail at its meetings. The Board has delegated to corporate management the responsibility for with regard to financial reporting, policies with checking financial press releases and presentation material in conjunction with meetings with the responsibility and authority, and developing training, media, shareholders and financial institutions. networking and experiential exchange within the Group in the field of internal control. Efforts to Board committees: examine the effectiveness of the internal control The Audit Committee usually meets in connection with the Board meetings and has the primary task included risk assessments as a basis for prioriti- of ensuring compliance with established principles for financial reporting and internal control and that zation, development, introduction, performance appropriate relationships with the company’s auditor are maintained in accordance with the “Instruction monitoring and follow-up of self-evaluations in the for the Audit Committee established by the Board of Directors of Trelleborg AB”. The Audit Committee Group’s companies and business areas, which is also charged with monitoring the follow-up and reporting of issues covered by Corporate Responsibility. are supplemented with internal audits that are The results of the Audit Committee’s work in the form of observations, recommendations and proposed performed by the Internal Control staff function or decisions and measures are continuously reported to the Board of Directors. external consultants, Deloitte, under the supervi- The Finance Committee has the primary task of supporting and monitoring financial operations, sion of the Internal Control staff function. The annually assessing and proposing changes to the Finance Policy, evaluating and preparing matters for function complies with an annual plan for its decision by the Board and, after each meeting, reporting on its work at the subsequent Board meeting. work, which is approved by the Audit Committee. The Remunerations Committee has the primary task of representing the Board in matters con- The Group’s CFO and the Head of the Internal cerning remuneration and terms of employment for the President and executives reporting directly to Control staff function report the results of the him based on the principles for remuneration and terms of employment for the President and other function’s work to the Audit Committee in connec- senior executives as adopted by the Annual General Meeting. The Committee continuously reports tion with its meetings. its work to the Board.

documents, and issues that always require a Board decision or reporting to Values the Board, such as the adoption of interim reports, annual reports and year- Trelleborg’s values – customer focus, performance, innovation and responsibility end reports, decisions regarding major acquisitions and business divestments, – comprise a long-term commitment that, when combined with its business decisions regarding other large investments, decisions about investments and concept, objectives and strategies, guides the employees in their daily activities. loans in accordance with the Treasury Policy, information on guarantees above Customer focus means an ambition to be the primary supplier of solutions in a certain level, adoption of remuneration and employment terms for the Presi- selected markets. All decisions are made with the customer in focus, with the dent and executives reporting directly to him. objective of creating added value for the customers and Trelleborg in close cooperation. Performance entails outperforming competitors and involves Code of Conduct achieving results and the manner in which this is conducted. Culture and atti- Within the Trelleborg Group, efforts are made to create added value for stake- tudes within Trelleborg shall promote Innovation. The daily ambition is to think holders without compromising the company’s high ambitions with regard to differently, in a new and creative manner. Innovation is an important driver of the environment and social responsibility. The Group’s Code of Conduct estab- growth. All employees also have a Responsibility for Trelleborg in its entirety – lishes how Trelleborg should conduct its business, including principles within the company’s profits and good reputation. the areas of Workplace and Environment, Marketplace, Society and Community and Corporate Governance. The Code of Conduct applies to all employees, including managers and Board members in the Trelleborg Group, in all markets, always and without exception. Trelleborg also encourages suppliers, sales representatives, consultants and other business partners to adopt the principles of both the Global Compact and Trelleborg’s own Code of Conduct.

ANNUAL REPORT 2008 TRELLEBORG AB 49 CORPORATE GOVERNANCE REPORT Group Management

President and Group Management PETER NILSSON PETER SUTER Trelleborg’s operation is organized into four business areas. These encompass 20 business units that cover about 40 product areas. Trelleborg has a decentralized structure, with a strong focus on responsibility and performance, which is combined with clearly-defined Group-wide processes that aim to achieve synergies. The President and CEO leads the work conducted by Group Management and renders decisions in consultation with other members of the management team, which consists of the heads of the business areas and staff functions. At the end of 2008, Group Management comprised a total of 12 persons. During 2008, seven meetings comprising Group management were held. These focused on the Group’s strategic and operational development and budget follow-up. In addition to these meetings, close cooperation takes place on a daily basis on BO JACOBSSON various issues between the operational business and representatives of the various staff functions. The company aims to create an open, clear and honest working culture, with short decision-making paths.

PRESIDENT AND CEO SÖREN ANDERSSON

Executive Vice President and CFO Other Group staff functions

MAURIZIO VISCHI

Trelleborg Trelleborg Trelleborg Trelleborg Engineered Systems Automotive Sealing Solutions Wheel Systems

Business Business Business Business units units units units

Product Product Product Product areas areas areas areas

ROGER JOHANSSON LENNART JOHANSSON VIKTORIA BERGMAN CLAUS BARSØE

PETER SVENBURG

CLAES JÖRWALL ULF GRADÉN

50 ANNUAL REPORT 2008 TRELLEBORG AB CORPORATE GOVERNANCE REPORT

PETER NILSSON CLAUS BARSØE CLAES JÖRWALL President and CEO Business Area President, Trelleborg Sealing Solutions Senior Vice President, Taxes and Group Structures Quali cations: M.Sc. Eng. Quali cations: B.Sc. Econ. Quali cations: Graduate in business administration Board member of Trelleborg AB (publ), Beijer Alma AB (publ), Previously held positions include market director Alfa Laval, Previously held positions include department manager at the Trioplast Industrier AB and The Chamber of Commerce and various positions within Busak+Shamban and Polymer Sealing Swedish National Tax Board. Industry of Southern Sweden. Solutions. Holdings 2008: 273 shares. Previously held positions include Business Area President, Trel- Holdings 2008: 25,000 call options*. Holdings 2007: 273 shares. leborg Engineered Systems, and other posts within the Trelleborg Holdings 2007: – Group, as well as management consultant at BSI. Born: 1953. Employed 1988, in current position since 1988. Born: 1949. Employed: 2003, in current position since 2003. Holdings 2008: 26,500 shares and 100,000 call options*. Holdings 2007: 26,500 shares. ULF GRADÉN Born: 1966. Employed: 1995, in current position since 2005. MAURIZIO VISCHI Senior Vice President, General Counsel and Secretary Business Area President, Trelleborg Wheel Systems Quali cations: Master of Law. Reporting clerk, court of appeal. Quali cations: MBA. Previously held positions include Corporate Legal Counsel at BO JACOBSS0N Mölnlycke and General Counsel at PLM/Rexam. Chief Financial Ofﬁ cer (CFO) and Executive Vice Previously held management positions within Pirelli. President, Trelleborg AB Holdings 2008: 25,000 call options*. Holdings 2008: 10,000 call options*. Quali cations: University studies in business administration. Holdings 2007: – Holdings 2007: – Previously held positions include CEO of the Scancem Group and Born: 1955. Employed 1999, in current position since 2001. Born: 1954. Employed 2001, in current position since 2001. CFO of Telia AB. Holdings 2008: 5,000 shares (own and family members) and 25,000 call options*. PETER SUTER SÖREN ANDERSSON Senior Vice President, Procurement and Strategic Senior Vice President, Human Resources Holdings 2007: 5,000 shares (own and family members). Projects. Quali cations: University studies in economics, sociology and Born: 1951. Employed: 1975-1997, CFO since 2002 and Execu- Quali cations: MBA. education. tive Vice President since 2005. Previously President of JD Stenqvist and Finess International and Previously held several HR positions within SCA. Business Area President, Trelleborg Building Systems. Holdings 2008: 2,000 shares and 10,000 call options*. LENNART JOHANSSON Holdings 2008: 10,085 shares. Holdings 2007: 2,000 shares. Business Area President, Trelleborg Engineered Holdings 2007: 8,085 shares. Systems Born: 1956. Employed 1998, in current position since 1998. Born: 1943. Employed 1991, in current position since 2007. Quali cations: M.Sc. Eng. Previously held positions include President of Kemira Kemi, VIKTORIA BERGMAN business unit manager of Kemira OY and Perstorp AB. PETER SVENBURG Senior Vice President, Corporate Communications Holdings 2008: 25,000 call options*. Senior Vice President, IT Quali cations: Studies in marketing, communications and PR. Holdings 2007: – Quali cations: Bachelor of Law. Previously held positions including Falcon Bryggerier and Vice Born: 1960. Employed: 2005, in current position since 2005. Previously held positions include CIO at Scancem/Heidelberg- President, Corporate Communications at Trelleborg. Cement. Holdings 2008: 500 shares (own and family members) and Holdings 2008: 107 shares. 10,000 call options*. ROGER JOHANSSON Holdings 2007: 107 shares. Holdings 2007: 500 shares (own and family members). Business Area President, Trelleborg Automotive Born: 1949. Employed 2006, in current position since 2006. Born: 1965. Employed 2002, in current position since 2005. Quali cations: Master of Business and Economic science. Previously held positions include Vice President of General Mo- tors Powertrain Europe and General Motors Purchasing Europe. Holdings 2008: 5,000 shares and 25,000 call options*. Holdings 2007: 5,000 shares. Born: 1965. Employed: 2007, in current position since 2007.

*Press release from the Henry and Gerda Dunker Donation Fund No. 2, February 26, 2008: Henry and Gerda Dunkers Donation Fond No 2 offers call optionprogram in Trelleborg Henry and Gerda Dunkers Donationsfond 2 has decided to offer certain mana- The board of Trelleborg AB has been informed of this offer. Trelleborg do not parti- gement executives of Trelleborg to purchase call options which carry rights to cipate in the offer and will not have any expenses in connection with the offer. purchase shares of series B in Trelleborg AB. The call options will be offered at The Henry and Gerda Dunker Donation Fund No. 2 is one of ve legal entities market price. The purpose of the offering is to promote long-term commitment for within the “Dunkerfoundations” which controls 13.4% of the shares and 55.5% of Trelleborg AB and to encourage management executives to become shareholders the votes in Trelleborg AB. in Trelleborg AB in the future which is important for the commercial development Helsingborg, February 26, 2008 of Trelleborg AB. Nine management executives have purchased 255.000 call HENRY AND GERDA DUNKER DONATION FUND NO. 2 options at a price of SEK10.98/option. Each call option will entitle to purchase one share of series B in Trelleborg AB during the period March 15, 2008 – March 15, 2012 at an exercise price at SEK 125.50.

ANNUAL REPORT 2008 TRELLEBORG AB 51 CORPORATE GOVERNANCE REPORT Remuneration to the Board and senior executives

Principles agreement shall be rendered invalid from the effective date of the Presi- The following principles for remuneration to senior executives in the dent’s possible early retirement. The pension agreement is solely premium- Trelleborg Group were adopted by the 2008 Annual General Meeting. based, and the premium is computed as 40 percent of the fixed annual The Board’s motion to the 2009 Annual General Meeting regarding salary. Pension premiums were expensed in 2008 as shown in the table principles for remuneration, see Note 3, page 90, is the same as that below. adopted by the 2008 Annual General Meeting. The President’s employment contract stipulates that termination of Trelleborg’s principles for remuneration to senior executives entail employment by the company shall be subject to a period of notice of 24 that the company shall offer market-based terms of employment that months, which does not apply if termination is initiated by the President. enable the company to recruit, develop and retain senior executives. The period of notice from the President is six months. The remuneration structure shall comprise fixed and variable salary, Other senior executives pension and other remuneration, which together form the individual’s The principles for remuneration to other senior executives are based total remuneration package. Trelleborg continuously gathers and evaluates on both a fixed and variable salary. The variable part has an established information on market-based remuneration levels for relevant industries upper limit and accounts for about 25-65 percent of fixed annual salary, and markets. It shall be possible for the principles for remuneration to based mainly on the earnings trend for the Group. vary depending on local conditions. Also refer to www.trelleborg.com, Some of the executives have agreements specifying mutual rights to Corporate Governance, Annual General Meeting: “Principles for remu- request early retirement from the age of 60. In this case, compensation neration and other conditions of employment for senior executives.” normally amounting to 60 percent of fixed annual salary is paid until

the age of 65, when the regular retirement pension payments become effective. Pension plans are defined-contribution schemes, whereby the Remuneration to management 2008 pension premium is calculated at 30 percent of the fixed annual salary. President For certain senior executives, extended notice of termination periods During 2008, the President and CEO received a fixed salary and other apply when initiated by the company, normally 12, 18 or 24 months, remuneration as shown in the table below. Pursuant to agreements, the which do not apply when initiated by the individual. For the President President has the possibility of obtaining a variable salary. The variable and other senior executives, there is an opportunity to have a company salary has an established upper limit for full-year 2008, which corre- car as a benefit. sponds to 65 percent of fixed salary and is 100-percent based on the The Group has a global remuneration policy that covers all man- Trelleborg Group’s profit before tax, excluding the effect of structural agers and senior salaried employees. In addition, there is a policy that changes approved by the Board. The variable salary does not constitute covers certain provisions for remuneration to senior executives, which pensionable income. In 2008, no variable salary was payable to the covers pension terms, medical expenses insurances and company cars. President, since the target figures were not achieved. The President has a pension agreement that entitles him to retire at Long-term incentive program the age of 65. However, under the terms of the pension agreement, both The Board of Directors resolved in 2005 to introduce a long-term in- the company and the President have the right, without special justifica- centive program for the President and certain senior executives that hold tion, to request early retirement from the age of 60, with a mutual six- a significant influence on the Trelleborg Group’s earnings per share. The month notice of termination. The employment agreement and pension Board of Directors also resolved to introduce a similar program in 2006,

Remuneration to Group Management 2008

SEK 000S Fixed Variable Bonus due Incentive Position Year salary salary for 2006 program Pension Bene ts Total

President 2008 6,693 2,402 153 9,248 2007 5,937 3,300 1,275 825 2,185 100 13,622 Executive Vice President 2008 3,211 2,024 127 5,362 2007 3,101 1,324 312 1,850 115 6,702 Group Management, others (10) 1) 2008 28,168 5,228 8,046 817 42,259 2007 25,599 8,533 2,286 9,540 623 46,581 Total 2008 38,072 5,228 – – 12,472 1,097 56,869

Total 2007 34,637 13,157 1,275 3,423 13,575 838 66,905

1) Changes to Group Management took place in 2007. In 2008, all individuals were employed throughout the entire scal year.

52 ANNUAL REPORT 2008 TRELLEBORG AB CORPORATE GOVERNANCE REPORT

2007, 2008 and 2009. The programs are ongoing three-year programs Other incentive programs for which the Board will, on a yearly basis, possibly approve new programs The Group has no ongoing convertible debenture or warrants programs and define their scope, objective and number of participants. at the present time. The incentive programs are cash-based and constitute a supplement to the annual variable salaries, provided that the executive is employed Remuneration to the Board 2008 by the Trelleborg Group as per December 31 in the year in which the The fees paid to the members of the Board of Directors elected by the program ends. Annual General Meeting are established by the Annual General Meeting based on the proposals of the Nominations Committee. For 2008, Purpose remuneration was paid as per the table below. No remuneration is paid The incentive program is directional and has long-term content that to members of the Finance Committee. No consulting fees were paid aims to continue to promote commitment of senior executives to the to the Board members. Remuneration is not paid to Board members Group’s development and thereby increase value for the Group’s share- who are also employed by the Group. holders. Remuneration to the auditor 2008 Target figures Remuneration for services in addition to auditing services primarily The target value for the incentive program is the Trelleborg Group’s refers to tax consultations and corporate acquisitions. For 2008, remu- earnings per share, with an annual improvement of 10 percent, excluding neration was paid as per the table below. items affecting comparability and the impact of any share buyback programs, and includes costs for the programs. For 2006, the Board established a target of sek 14.10 in earnings per share, in 2007, a target of sek 11.90 and in 2008, a target of sek 14.40, with the upper cap for payments set at 25 percent of the maximum annual variable salary per year.

Outcome and payment The result is calculated annually and accumulated over the three-year period, and potential payments are made in the first quarter of the year after the program expires. Accordingly, for the program approved for Remuneration to auditors 2008 2005, payment was made in the first quarter of 2008, for the program SEK M 2008 2007 2006 approved in 2006, payments will be made in the first quarter of 2009, for Remuneration for auditing services 37 35 30 the program approved in 2007, payments will be made in the first quarter Remuneration for other services 9 12 14 of 2010, and for the program approved in 2008, payments will be made in the first quarter of 2011. The payments do not constitute pensionable Total 46 47 44 income. In 2008, earnings were charged with sek – (9,964,000).

Remuneration to the Board (SEK) for the period May 2008 – April 2009 Remuneration is not paid to members of the Finance Committee. No consulting fees were paid to Board members.

SEK Board fees Audit Committee Remunerations Committee Total Name Position 2008 2007 2008 2007 2008 2007 2008 2007 Anders Narvinger Chairman 950,000 900,000 100,000 90,000 50,000 – 1,100,000 990,000 Heléne Bergquist Member 360,000 340,000 100,000 90,000 460,000 430,000 Staffan Bohman Member 360,000 340,000 50,000 – 410,000 340,000 Rolf Kjellman Member 360,000 340,000 150,000 125,000 510,000 465,000 Claes Lindqvist Member 360,000 340,000 50,000 – 410,000 340,000 Berthold Lindqvist Member 340,000 340,000 Sören Mellstig Member 360,000 360,000 Peter Nilsson President – – – – Total 2,750,000 2,600,000 350,000 305,000 150,000 – 3,250,000 2,905,000

ANNUAL REPORT 2008 TRELLEBORG AB 53 CORPORATE GOVERNANCE REPORT Report by the Board of Directors on Internal Control

The responsibility of the Board of Directors for with legislation, applicable accounting standards and other require- internal control is regulated in the Swedish Com- ments on listed companies. panies Act and in the Swedish Code of Corporate Control environment The Board of Directors bears the overall responsibility for internal Governance, which also includes requirements on control of the financial reporting. The Board has established a written annual external information disclosure concerning formal work plan that clarifies the Board’s responsibilities and regulates how internal control is organized insofar as it the Board’s and its committees’ internal distribution of work. Furthermore, the Board has appointed an Audit Committee, the affects financial reporting. primary task of which is to ensure that established principles for financial reporting and internal control are adhered to and that appropriate Internal Control as regards financial reporting is a part of the total internal relations are maintained with the company’s auditors. The Board has control within Trelleborg, whose starting point for the process is in the also established instructions for the President and instructions for Committee of Sponsoring Organizations of the Treadway Commission financial reporting to the Board of Trelleborg. The responsibility for (COSO) model, refer to review below, and is a key component in maintaining an effective control environment and the ongoing work on Trelleborg’s Corporate Governance. Internal Control is also a part of internal control as regards the financial reporting is delegated to the the Group’s Enterprise Risk Management process; refer to page 36. President. The Group’s Internal Control staff function works as the The following description was prepared in accordance with the Group’s internal audit function and reports to the Audit Committee Swedish Code for Corporate Governance and represents the Board of and the Group’s CFO. The function focuses on developing and Directors’ report on internal control regarding financial reporting. This enhancing internal control over the financial reporting in the Group by description does not constitute part of the formal Annual Report docu- proactively concentrating on the internal control environment and by ments and has not been reviewed by the company’s auditor. examining the effectiveness of the internal control. Internal steering instruments for financial reporting primarily Internal Control over financial reporting comprise the Group’s Treasury Policy, Communication Policy and Internal Control as regards financial reporting aims to provide reason- Finance Manual, which define the accounting and reporting rules, and able assurance with regard to the reliability of the external financial the Group’s definition of processes and minimum requirements for reporting in the form of interim reports, annual reports and year-end internal control over financial reporting. reports, and that external financial reporting is prepared in accordance

Internal Control – a process that supports operational goal achievement Trelleborg has defined internal control as a process that is influ- enced by the Board of Directors, the Audit Committee, the Presi- Risk assessment Control environment dent, Group Management and other employees and is formulated Trelleborg’s targets to provide reasonable assurance that Trelleborg’s goals are achieved in terms of appropriate and effective business activities, Processes reliable reporting and compliance with applicable legislation and Control regulations. The process is based on a control environment that structure creates discipline and structure for the other four components of Follow-up the process, namely, risk assessment, control structures, information Information and communication, and monitoring. The starting point for the pro- and communication cess is the framework for internal control issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), www.coso.org. The control environment includes the values and ethics upon whichh the Board, the Audit Committee, the President and Group Management base theitheirr communication and actions, as well as the Group’s organizational structure, leadership, decision routes, authorizations, responsibilities and the expertise of the employees. An overview of the Group’s organization and governance, including external and internal steering instruments that are important elements of Trelleborg’s control environment, are outlined on pages 10–11 and 48–49. Trelleborg’s values constitute a long-term commitment, which, combined with business concepts, targets and strategies, guides the employees in their daily work. Trelleborg’s Code of Conduct comprises principles for how business should be conducted. Trelleborg is characterized by a decentralized organization that is managed based on target-oriented leadership with clear targets and rewards based on performance. Risk assessment is described on pages 36–39. Control structures are about which controls were chosen to manage Group risks. Examples of control strategies that are applied in the Group are found on pages 36-39 and on page 55. Information and communication, external and internal. External information and communication include, for example, reporting to authorities and external financial reporting. Internal information and communication are about creating awareness among Group employees about external and internal steering instruments, including authority and responsibilities. Important tools for this include Trelleborg’s intranet and training programs. A process exists where Group employees confirm that they comply with Group policies. Trelleborg also has a whistle blower policy, which means that each employee may, without repercussions, report suspicions of legislation or regulation violations. Internal information and communication also concerns the information generated by Trelleborg’s process for internal control being fed back to the Board, Audit Committee, President and Group Management as a basis for being able to make well-founded decisions. The Group’s CFO and Head of the Internal Control Group staff function submits a report to the Audit Committee, which in turn submits a report to the Board. Monitoring aims to secure the effectiveness of the process through a number of different activities, such as monitoring of operations in terms of established goals, self-evaluations, internal audit and other monitoring activities.

54 ANNUAL REPORT 2008 TRELLEBORG AB CORPORATE GOVERNANCE REPORT

Risk assessment and will provide coworkers with the possibility to access tools and Trelleborg’s risk assessment as regards financial reporting aims to iden- documents that support effective internal control and steering and give tify and evaluate the most significant risks that affect internal control examples of sound operational solutions. This service will be launched over financial reporting in the Group’s companies, business areas and at the beginning of 2009. processes. The risk assessment results in control targets that ensure that One of the processes utilized by the Group requires all relevant the fundamental demands placed on financial reporting are fulfilled employees to confirm compliance with Trelleborg’s policies on an and comprise the basis for how risks shall be managed through various annual basis. The Group’s CFO and the Head of the Internal Control control structures. The risk assessment is updated on an annual basis staff function have reported the results of their work on internal control under the direction of the Internal Control staff function and the results as a standing item on the agenda of the Audit Committee’s meetings. are reported to the Audit Committee. The results of the Audit Committee’s work in the form of observations, recommendations and proposed decisions and measures are continu- Control structures ously reported to the Board. External financial reporting is performed The most significant risks identified as regards financial reporting are in accordance with relevant external and internal steering instruments. managed through control structures in companies, business areas and processes. Management may entail that these risks are accepted, reduced or eliminated. The purpose of the control structures is to ensure effi- Monitoring ciency in the Group’s processes and effective internal control and is Monitoring to ensure the effectiveness of internal control as regards based on the Group’s minimum requirements for effective internal con- financial reporting is conducted by the Board, the Audit Committee, trol in defined, significant processes, which is demonstrated in the dia- the President, Group Management, the Internal Control staff function gram below. Minimum requirements comprise more general as well as and by the Group’s companies and business areas. Monitoring includes detailed controls and can be both preventive and detective in nature the follow up of monthly financial reports in relation to budget and and have been subdivided into A and B levels, according to which the targets, as well as quarterly reports with results from self-assessments in A level shall be applied by all of the companies in the Group and the B the Group’s companies and business areas, and using results from internal level by only the Group’s largest companies audits performed by the Internal Control staff function or external A comprehensive revision of minimum requirements for IT security consultants, Deloitte, under the direction of the Internal Control staff controls was conducted in 2008. In addition, the Purchasing process function. The Internal Control staff function works in accordance with and the annual accounts and reporting process, with the associated an annual plan that is approved by the Audit Committee. The plan is minimum requirements for effective internal control, were developed based on the risk analysis and encompasses prioritized companies, business in 2008 and will be introduced in the Group in 2009. areas and processes, as well as work programs and budgets. In 2008, focus areas for the Internal Control staff function were the sales process, the IT security process and training in the sales process and inventory Information and Communication management process. Focus areas in 2009 will include the purchasing Information and communication regarding internal steering instru- process, the annual accounts and reporting process, and the launch of a ments for financial reporting are available on Trelleborg’s intranet to all new section of the intranet containing standardized tools, documents employees concerned. and examples of operational solutions. In 2008, some 60 key employees completed a number of training courses relating to the sales process and the inventory management Trelleborg, February 10, 2009 process under the supervision of the Internal Control staff function. The Board of Directors of Trelleborg The flow chart detailing defined processes connected to the minimum requirements for effective internal control was distributed and discussed during training. A new section of the intranet is under development

Significant processes: Treasury Etc. Business area 2 Purchasing - self assessment Business area 1 Company 2 - internal audit Company 1 - training/tools Self-assessment Internal audit Training/tools

• Group-wide reporting system with • Audit of about 20 subsidiaries using • Training programs regarding defined Purchasing process subsidiaries reporting back each external consultants Deloitte in 2008 processes connected to minimum re- quarter • Audit of a number of subsidiaries by quirements for effective internal con- • Subsidiaries respond to how they Internal Control staff function trol for some 60 employees in 2008 Inventory management comply with the Group’s minimum re- • Includes selected processes and • The aim of training is to increase process quirements for effective internal con- minimum requirements for effective knowledge levels and understanding trol in selected processes internal control pertaining to efficient processes and effective internal control • Deficiencies identified, measures • Results of audits include suggestions planned and implemented by the for measures • Training is a forum for sharing experi- Sales process companies ences and best practice • Identified deficiencies are followed up • Includes approximately 100 subsidiar- on a quarterly basis by business area • A new intranet site will be launched Process for property, plant ies, of which the largest (about 40 controllers and the Internal Control at the beginning of 2009 and provide companies) will apply both A and B staff function. coworkers with access to standard- and equipment levels with regard to the minimum ized tools, documents and examples requirement for effective internal con- of operational solutions. Annual accounts and trol, and the approximately 60 smaller companies shall only apply the A level financial reporting process • Up to 270 requirements for effective internal control IT security process • All relevant employees confirm compliance with Group’s policies on an annual basis.

ANNUAL REPORT 2008 TRELLEBORG AB 55